Lockheed Martin 2015 Annual Report Download - page 54

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Backlog
Backlog decreased in 2015 compared to 2014 primarily due to sales being recognized on several multi-year programs
(such as HMSC, NISC III, CIOG and NSF ASC) related to prior year awards and a limited number of large new business
awards. Backlog decreased in 2014 compared to 2013 primarily due to lower customer funding levels and declining activities
on direct warfighter support programs impacted by defense budget reductions.
Trends
We expect IS&GS’ 2016 net sales to decline in the high-single digit percentage range as compared to 2015, primarily
driven by key loss contracts in an increasingly competitive environment, along with volume contraction on the segment’s
major contracts. Operating profit is expected to decline at a higher percentage range in 2016, as compared to net sales
percentage declines, driven by higher margin program losses and re-compete programs awarded at lower margins.
Accordingly, 2016 margins are expected to be lower than 2015 results.
Missiles and Fire Control
Our MFC business segment provides air and missile defense systems; tactical missiles and air-to-ground precision strike
weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration
services; manned and unmanned ground vehicles; and energy management solutions. MFC’s major programs include PAC-3,
THAAD, Multiple Launch Rocket System, Hellfire, JASSM, Javelin, Apache, Sniper®, Low Altitude Navigation and
Targeting Infrared for Night (LANTIRN®) and SOF CLSS. MFC’s operating results included the following (in millions):
2015 2014 2013
Net sales $ 6,770 $ 7,092 $ 6,795
Operating profit 1,282 1,344 1,379
Operating margins 18.9% 19.0% 20.3%
Backlog at year-end $15,500 $13,300 $14,300
2015 compared to 2014
MFC’s net sales in 2015 decreased $322 million, or 5%, compared to the same period in 2014. The decrease was
attributable to lower net sales of approximately $345 million for air and missile defense programs due to fewer deliveries
(primarily PAC-3) and lower volume (primarily THAAD); and approximately $85 million for tactical missile programs due
to fewer deliveries (primarily Guided Multiple Launch Rocket System (GMLRS)) and Joint Air-to-Surface Standoff Missile,
partially offset by increased deliveries for Hellfire. These decreases were partially offset by higher net sales of approximately
$55 million for energy solutions programs due to increased volume.
MFC’s operating profit in 2015 decreased $62 million, or 5%, compared to 2014. The decrease was attributable to lower
operating profit of approximately $100 million for fire control programs due primarily to lower risk retirements (primarily
LANTIRN and SNIPER); and approximately $65 million for tactical missile programs due to lower risk retirements
(primarily Hellfire and GMLRS) and fewer deliveries. These decreases were partially offset by higher operating profit of
approximately $75 million for air and missile defense programs due to increased risk retirements (primarily THAAD).
Adjustments not related to volume, including net profit booking rate adjustments and other matters, were approximately
$60 million lower in 2015 compared to 2014.
2014 compared to 2013
MFC’s net sales increased $297 million, or 4%, in 2014 as compared to 2013. The increase was primarily attributable to
higher net sales of approximately $180 million for air and missile defense programs primarily due to increased volume for
THAAD; about $115 million for fire control programs due to increased deliveries (including Apache); and about
$125 million for various other programs due to increased volume. These increases were partially offset by lower net sales of
approximately $115 million for tactical missile programs due to fewer deliveries (primarily High Mobility Artillery Rocket
System and Army Tactical Missile System).
MFC’s operating profit decreased $35 million, or 3%, in 2014 as compared to 2013. The decrease was primarily
attributable to lower operating profit of about $20 million for tactical missile programs due to net warranty reserve
adjustments for various programs (including JASSM and GMLRS) and fewer deliveries; and approximately $45 million for
various other programs due to lower risk retirements. The decreases were offset by higher operating profit of approximately
$20 million for air and missile defense programs due to increased volume (primarily THAAD and PAC-3); and about
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